French challenger Iliad’s surprise US$15bn cash offer for 56.6% of T-Mobile US late yesterday caused its share price to fall more than 10% overnight. Iliad’s billionaire owner Xavier Niel caught the market off guard with its opportunistic move…
French challenger Iliad’s surprise US$15bn cash offer for 56.6% of T-Mobile US late yesterday caused its share price to fall more than 10% overnight.
Iliad’s billionaire owner Xavier Niel caught the market off guard with its opportunistic move for the US’ fourth largest mobile operator, which valued the shares at US$33 each.
In a statement, Iliad compared itself to T-Mobile, which it said occupies a similarly disruptive position in the US market to where it sits in the French sector.
The group, which operates Free Mobile in France, said its proposal values the remaining 43.4% of T-Mobile at US$40.5 per share on the basis of the US$10bn in synergies that will be generated, which T-Mobile shareholders will benefit from.
Analysts are less sure. Credit Suisse analyst Joseph Mastrogiovanni said in a note that he was “sceptical” of Iliad’s synergies figure. He noted that even if T-Mobile were to merge with domestic rival Sprint Corp, which it has reportedly held thorough talks with, it could be looking at US$5bn in synergies at the most. New Street Research analyst Russell Waller also doubted the synergies estimate.
Softbank’s Sprint is reportedly set to pay US$40 per T-Mobile share, but a merger would face a lengthy regulatory process and the consensus of analysts is that is more likely to be blocked than allowed.
In a memo Waller suggested that the T-Mobile board, and parent Deutsche Telekom, would have to decide if the regulatory certainty associated with Iliad’s lower offer is enough to offset the low price, in comparison to the Sprint proposal on the table.
Waller considered the offer quite low and expected T-Mobile’s board to reject it and wait for more approaches.
Jonathan Chaplin, another analyst from New Street, commented in a note: “We don’t think the Iliad bid is all that compelling as it stands, but it highlights the fact that T-Mobile is an attractive asset to people other than Sprint.”
T-Mobile’s stock price rose 7% yesterday after the bid was disclosed.
The deal would be financed via a combination of debt and equity and Iliad said it has the support of leading international banks for the acquisition debt. BNP Paribas and HSBC are reported to be leading the financing for the bid while Lazard is said to be acting as Iliad’s M&A adviser.
The equity portion will be approximately €2bn, and Iliad’s owner Xavier Niel would participate in the capital increase.
Iliad’s interest rivals that of Sprint Corp, which has been in talks with Deutsche Telekom for months. Sprint and its owner, Japanese group Softbank, have been working on a massive financing package to acquire the operator.
